Hugh Osmond: Ready for action

The group, which owns the Holiday Inn and Intercontinental chains, said Osmond's proposal "gives shareholders nothing they do not already own except significant risk".

Under Mr Osmond's plan, Six Continents would be broken up, with the hotels business to be sold to rival hoteliers or run in partnership with other companies.

But Six Continents says it is sticking to its own plan to demerge its pubs divisions, which includes the O'Neills and All-Bar-One chains, from the hotels unit, a move it claims would offer shareholders a much better deal.

Misguided plans?

Mr Osmond has described the demerger proposal as "misguided", and accused the embattled company of delivering "unacceptably low returns" for shareholders.

Our central point is that Six Continents is at sixes and sevens - they have destroyed shareholder value for years Hugh Osmond

But in a strongly-worded rejection of his overtures, Six Continents said Mr Osmond was "offering shareholders at most 98% of their own company".

The deal on the table would "massively enrich" the directors of Mr Osmond's investment vehicle Capital Management & Investment (CMI) "which can only be at the expense of Six Continents shareholders," it claimed.

CMI's bid also raised corporate governance issues, as it CMI lacks independent directors, Six Continents added.

Osmond's offer

Mr Osmond is offering investors 36 new shares in CMI for each Six Continents share.

As an alternative to the all-share offer, Six Continents shareholders can choose to take a partial cash deal.

In both cases, shareholders would also be able to keep the announced interim dividend of 6.6p per share.

The deal would also see �1.4bn of cash returned to shareholders - double the �700m Six Continents has pledged to pay out if its own proposed demerger takes place.

Mr Osmond is thought to have lined up Hilton, Marriott and Starwood as buyers for some of Six Continents' hotels.

His CMI group plans to release funds for shareholders through a series of sale and leaseback deals on Six Continents' 2,000 pubs.

Mr Osmond said: "Our central point is that Six Continents is at sixes and sevens.

"They have destroyed shareholder value for years.

"Almost �6bn of net investment has left operating profits lower than 10 years ago."

Bidding war?

Mr Osmond's offer depends on shareholders turning down Six Continents' demerger plan at a meeting on 12 March.

The enlarged group would seek a stock market listing of its own, and would likely be propelled straight into the blue chip FTSE 100 share index.

Shareholders may opt to hold out for a demerger, banking on the prospect of a Safeway-style bidding war to maximise their profits.

A number of rival hotel groups and venture capital firms are thought to be waiting on the sidelines to bid for Six Continents' pub and hotels.

Mr Osmond will also have to convince investors he is not simply out to make a fast buck.

According to some reports, he could net �200-300m from the deal.

Pub experience

Mr Osmond made his reputation as a corporate raider when he snatched Allied Domecq's pub estate from under the nose of leisure giant Whitbread.

He has little experience of the hotel business, but plans to farm Six Continents' hotel unit to an as-yet-unnamed third party.

His trump card may be his experience of the pub trade, gained through his successful stewardship of the Punch Taverns group.

The Takeover Panel said Mr Osmond's CMI group proposed to dispose of 2.6 million shares it currently holds in Six Continents and would donate any profits from the sale to charities of its choice.

Demerger continues

Meanwhile, Six Continents continued its preparations to split into two separately listed companies.

It announced the appointment of Safeway chairman David Webster to the board of its demerged hotels arm, Intercontinental Hotels Group.

It also released details of its employee share plans for Intercontinental and Mitchells and Butler, the proposed new name for its pub arm.

Six Continents shares stood 15p lower at 604p in late morning trade on Monday.